Interest rate converter

Because the interest of the second month runs on a balance that already grew in the first. Compounding one percent twelve times gives 12.6825 percent a year, not 12.

The gap looks small at one percent and stops looking small as the rate goes up: it is the whole reason a card rate quoted per month sounds harmless.

A nominal rate is a label, not a rate you ever pay. Twelve percent a year compounded monthly means one percent a month, and the year that actually comes out of it is 12.6825 percent.

That is why the second option on the form divides the number you typed before anything else: writing it as a yearly figure is a convention of the contract, not the cost of the money.

There is no single right answer, which is why it is a field. 360 is the commercial year of twelve thirty day months and is the usual one in financial maths, 365 is the calendar, and 252 is the business day count used for the CDI in Brazil.

It only changes the daily line. Every other line comes out the same whichever basis you choose.

With the twelfth root, not with a division. Ten percent a year is 0.7974 percent a month, while dividing by twelve would say 0.8333 percent.

The difference is small on one month and stops being small once you carry it across a whole contract.